I love using marshmallow fondant... its cost effective and tastes good.  However, I noticed the last time I used it, there were small "pitts" on it when I applied it to the cake.  I sifted the powdered sugar, can anyone tell me where I might have gone wrong or how it can be fixed?

ohh! i have the same problem! i hope the experts can help us out :) 

I used to use MMF exclusively until the last three batches did that pitted thing.  I've been using FondX since then but miss the yumminess of MMF.  I can't help you with the why but I can say I'm in the same boat.

Are you sifting your powdered sugar? The one time I've had that problem is when I made a batch without sifting first.  A lot of people say that it doesn't make a difference; however, in my own experience it makes a world of difference.

Yep. Sifted the PS because I've had the unfortunate experience of getting little hard balls of PS if I don't.  This is more like teeny, weeny pock marks.

I found another thread that discusses the possible causes:

http://cakecentral.com/t/685946/why-fondant-pock-marks

I hope it helps!